A time capsule of the greatest financial mania in the history of mankind, told in real-time by regular folks and patriots. May future generations better understand the madness of crowds, and how power and money corrupt.

May 09, 2008

If REAL inflation is running at 7% to 11%, doesn't that mean that the US economy growing at only 0.6% really signals a pretty massive recession? And that "flat" US average incomes are actually plummeting? And doesn't that mean that the 12.7% reported fall in home prices is more like 20%?

One more time - if you believe the government's inflation number, you are a fool. But it's really not a question of whether you believe it or not, just go to the grocery store and gas station. The real inflation report can be found there.

22 comments:

Anonymous
said...

Hi Keith,

Doesn't the Shiller index use government published inflation when determining "real" housing prices? If the government inflation numbers have been low all this time, then doesn't that mean that the Shiller index overstates how high house prices went in real terms?

If REAL inflation is running at 7% to 11%, doesn't that mean that the US economy growing at only 0.6% really signals a pretty massive recession?Bogus government statistics aside, a Recession is and has been defined as for decades as two consecutive quarters of negative GDP growth. This has not ever been compared to contemporaneous inflation to call a Recession when growth dips below inflation.

So by government stats we are not in a recession. If you can provide a GDP number that is negative, then we are half way there.

But attempting to goose the definition as GDP that is below inflation isn't legit and isn't what a Recession is.

Frankly, if you believe either of the stats you are a fool. Obviously the gov't stats are depressed to reduce payouts for SS, etc. But Williams is just as bad on the other side.

If you believe the Shadow stats, you also have to believe that the US has been in a recession since 1994. (estimated by GDP growth minus the difference between the Shadow and gov't CPI numbers). No, the economy hasn't been great, especially since the dot-com bust, and then housing bust. But you are flat out insane if you think we have been down for nearly 15 years.

I have been ordering equipment for my business online this past few weeks. They say shipping will take 4-6 working days. The merchandise is arriving within two or three days. Guess they have plenty of time and inventory on there hands with this "mild" slowdown.

The middle class is much better off today than in 1994. A huge part of the problem is overspending. If people hadn't blinged out, the huge credit card debt would not be there. These days, everyone is driving a luxury car and taking exotic vacations. Those things were unheard of 15 years ago. Only doctors and lawyers had luxury cars and $500,000 houses, took vacations to Tahiti. Now we have clerks at Target buying $800,000 houses.

CNN -- Jonathan Hash, a history teacher at Herbert Hoover High School in San Diego, is enthusiastic about the teaching career he began two years ago. But now he might lose his job because of a statewide budget crisis, and that could force him to leave teaching altogether.

"I love what I do, but I would like to have some security," said Hash, who makes $43,000 a year and just bought a home with his pregnant wife in one of the nation's most expensive housing markets. "I have a mortgage now and I have a kid on the way, so I have to do whatever I have to do to make ends meet."

Hash is considering joining family members in real estate or insurance.

If you actually look up you definition (or think for a second) you'll see that it's real GDP growth. Germany did not see massive GDP growth during it's hyper inflationary phase because GDP is always stated in real terms...

If inflation is in fact higher than reported, then real GDP growth is lower - basic arithmetic there, might be too hard for you I guess...

GDP is already reported in real terms with inflation removed, obviously you have to lower it a bunch further if you think the inflation numbers are being goosed.

So, it's you who is goosing GDP numbers by treating them as real without actually subtracting all the inflation...

Or do you really think Brazil was booming in 1994 when their GDP increased by 2400% (before adjusting for the hyperinflation...)

Infallation round here? No way. I buy 10 gallons of gas a day for about 1.00 more per gallon than last year,nope no inflation here. Local restaurant going out of business.Dude says the price of supplys are through the roof over last year.Yeah right. Saw the price of base metals at all time highs,means nothing. Hamburger up double,sheesh,who eats hamburger? Now I do recall in the 60s that gasoline could be had at 50 cents a gallon.Oh yeah,that was then this is now.I could go on but not needed.

I work as a Heating and Air conditioning technician. I can tell you that supplies and equipment, coupled with higher gas prices, insurance prices, sometimes i wonder how long we will be able to make it. I still make the same amount of money as i have for the past few years, due to higher costs eating up the profit margins. Then i go home and pay higher insurance, groceries, utilities. Honestly i wonder how the average American is making it these days....and where does this all end?